1. The controller for Phil's Drones has gathered the following cost and activity level information:

Average total cost per unit	$225.00
Production level used to calculate average cost	1,000
Total fixed costs	$80,000

a. What is the total cost of producing 1,000 drones?

b. What is the variable cost of producing each drones?

c. Suppose the controller uses the average cost to predict total costs. What total cost would the controller calculate for 2,500 drones?

d. If the controller uses the cost equation to predict total costs, what total cost would the controller calculate for 2,500 drones?

e. Is there a difference between the forecasted total cost using average cost versus the cost equation? If there is a difference, what creates the difference? If there is no difference, when would there be a difference?

2. Match the term on the right with the appropriate definition provided on the right.

	Definition	Term
1	A statistical procedure for determining the line that best fits the data by using all of the historical data points, not just the high and low data points	Outliers
2	Costs that change, but not in direct proportion to changes in volume	Fixed costs
3	A cost behavior that is not linear (not a straight line)	Contribution Margin
4	Costing concept where all manufacturing-related costs, whether fixed or variable, are "absorbed" into the cost of the product	Variable costs
5	Costs that do not change in total despite wide changes in volume	Cost behavior
6	A cost behavior that is fixed over a small range of activity and then jumps to a different fixed level with moderate changes in volume	Absorption Costing
7	Sales revenue minus variable expenses	Curvilinear costs
8	Abnormal data points; data points that do not fall in the same general pattern as the other data points	Mixed costs
9	A method for determining cost behavior that is based on a manager's judgment in classifying each account as to its cost behavior	Cost equation
10	Describes how costs change as volume changes	Regression analysis
11	A mathematical equation for a straight line that expresses how a cost behaves	Account analysis
12	Costs that change in total in direct proportion to changes in volume	Step costs